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ADW Capital Management, LLC
EnviroStar: History Doesn’t Repeat Itself, But it Often Rhymes
October 2018
Strictly Confidential
EnviroStar (NYSE:EVI)
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
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CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
EnviroStar – Investment Overview
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(NYSE:EVI)
▪ Distributes & services industrial and commercial laundry, dry-
cleaning, steam & hot boiler equipment
▪ Owner operator: Chairman & CEO, Henry Nahmad controls ~70%
of the Company
▪ High quality moat business focused on deploying capital towards a
“buy-and-build strategy” in a fragmented industry with very
attractive returns on invested capital and natural cost & revenue
synergies
▪ At the current share price, we believe the market is significantly
underpricing EnviroStar’s growth opportunity and normalized
earnings power – creating enormous asymmetry
▪ We believe Henry Nahmad is in the early innings of creating
monumental shareholder value over a multi-decade period
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
A Timeline Of Mr. Nahmad’s Deal Making So Far
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An investment in EnviroStar on the day Henry Nahmad took control of the company and began
executing on his “buy and build” strategy has yielded an 11x return
EVI acquires “Worldwide” for an
undisclosed amount
EVI acquires a Laundry Business for
an undisclosed amount
EVI acquires “Skyline” for an
undisclosed amount
Henry Nahmad acquires 40.4% stake in EnviroStar Inc. (EVI)
through Symmetric Capital LLC
EVI acquires “Western State Design” for $28.0M
EVI acquires “Martin-Ray Laundry Systems" for $4.0M
EVI acquires “Tri-State Technical Services” for $16.5M
EVI acquires “AAdvantage Laundry Systems" for $17.0M
EVI acquires “Scott Equipment" for $13.0M
EVI acquires “ISL” for an undisclosed amount
0
10
20
30
40
50
Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18
Source: Capital IQ
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
Buy-And-Build Strategy: A Family Affair
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Henry Nahmad has already spent over 3.5 years building an acquisition pipeline that can fuel the
Company’s growth for many years to come
▪ CEO, Henry Nahmad is utilizing the “buy-and-build” playbook from his experience as Head of M&A at HVAC/R
distributor Watsco (NYSE:WSO) – run by his uncle Albert Nahmad
➢ Since initiating his buy-and-build strategy in 1990, Albert Nahmad generated a ~100x return for
shareholders
➢ Watsco used a mix of cash and stock to grow accretively – using their stock as a currency and
purchasing assets at 4-6x EBITDA
➢ Over time, Watsco leveraged their “buy-and-build” expertise to expand into complimentary businesses,
gain market share and grab new geographies
➢ Albert Nahmad’s strategy ultimately grew free cash flow by ~50x while only growing debt and
shares outstanding by ~6x
▪ Since taking control of EnviroStar, Henry Nahmad has been a disciplined acquirer – paying on average
only ~5x EBITDA and replicating his uncle’s PROVEN strategy
➢ Financed acquisitions with a mix of cash and stock - issuing shares to buy high-quality assets with
opportunities for growth at 4-6x – with sellers typically staying on board to run their own division
➢ By sharing corporate level resources with its local leadership, the Company will continue building
significant value for acquired businesses
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
Analogies to POOL Corp. (NYSE:POOL)
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▪ In 1995, pool equipment distributor, POOL Corp. became a publicly traded company under the control of
“Watsco Cub”, Manuel Perez de la Mesa (“Manny”), former VP of Distribution Operations at Watsco
➢ POOL served as a platform to initiate the established “buy-and-build” playbook
➢ Under Manny’s leadership POOL has become the world’s largest distributor of pool supplies –
effectively replicating Watsco’s strategy of growing through disciplined and accretive acquisitions
➢ Since his appointment as CEO, Manny has made over 30 acquisitions to expand POOL’s product
offering, gain market share, and grab new geographies
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Under Manny Perez de la Mesa’s leadership, POOL’s successful “port-over” of Watsco’s “buy-and-
build” playbook has yielded ~183x return for shareholders
Source: Capital IQ
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
POOL Corp. – The First 10 Years: 1994 - 2004
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1994: POOL Corp. partners with a PE fund
and develops a new growth strategy
1995: IPO and Manny is named CEO
1997: EBIT margin drops as Manny invests in overhead to support the “buy-and-build”
growth engine
2004: POOL Corp. sees significant EBIT margin expansion – from 3.9%
to 8.5% as the Company benefits from scale
2004: As Manny executes on the playbook, revenues grow ~9x over the first 10
years
100mm
300mm
500mm
700mm
900mm
1100mm
1300mm
1500mm
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1994 1996 1997 1998 1999 2000 2001 2002 2003
Pool Corporation (NasdaqGS:POOL) - EBIT Margin %
Pool Corporation (NasdaqGS:POOL) - Revenues
2004
Source: Capital IQ
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED. 8
▪ Before Henry Nahmad took control of EnviroStar, the legacy business was doing in excess of 12%
EBIT margins if we back out corporate overhead and public company costs: removing the $1mm –
$1.5mm in overhead gives us between $3.7mm – $4.2mm in consolidated station level EBIT, on $30.8mm in
revenues, consolidated station level EBIT margin was between 12% - 14% in 2015
▪ Today, EnviroStar is still heavily investing in overhead to support the “buy-and-build” growth engine, and
similarly to POOL, EBIT margins will significantly ramp up with revenue growth as corporate overhead
stabilizes
A Look At EnviroStar’s Numbers
Henry Nahmad becomes CEO & Chairman of EnviroStar –legacy business was doing
12% - 14% EBIT margin excluding overhead
Trough EBIT margin from investments in
“growth engine”
Major EBIT margin expansion from
platform operating leverage
EnviroStar executes on “buy-and-build”
playbook – revenues ramp up
0
100mm
200mm
300mm
400mm
500mm
600mm
700mm
800mm
900mm
1000mm
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
EBIT Margin % Projected EBIT Margin % Revenues Projected Revenues
2015 // 2020-2021(est.)Source: Capital IQ
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
A Look At EnviroStar’s Numbers (cont.)
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▪ We estimate that Pro-Forma for the most recent acquisitions and continued high-single-digit organic growth,
EnviroStar will generate nearly $255mm in revenues in 2019
▪ Based on historical numbers, we believe that EBIT margins at the location level are ~12% today (ex.
corporate overhead which will NOT scale) and just like POOL, consolidated EBIT margins will ramp up as
the Company gains scale and leverages its platform / corporate infrastructure
➢ Market Cap: ~ $420mm
➢ Net debt: $8mm
➢ EV: ~ $428mm
➢ 2019 Normalized EBIT: $30.6mm (ex. additional acquisitions)
➢ Normalized EV/EBIT: ~13.5x (ex. additional acquisitions)
▪ We believe that by following its established playbook, EnviroStar can compound EBIT at 50 - 100% per
year for the foreseeable future while maintaining modest leverage – deserving of a significant valuation
premium over publicly traded distributors
➢ SiteOne: 24x 2019 EBIT – Growing 10-13% per annum
➢ POOL: 23.5x 2018 EBIT – Growing 8-10% per annum
➢ Fastenal: 17x 2018 EBIT– Growing 3-6% per annum
➢ Watsco: 16.5x 2018 EBIT – Growing 3-6% per annum
In its early years, Fastenal earned a 30-40x EV/EBIT valuation multiple for its growth opportunity – at
30x our 2019 estimated numbers, EnviroStar would trade at $80+ per share!Sources: Capital IQ and internal estimates
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
The Organic Opportunity – The “BUILD” Component
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▪ We believe EnviroStar has a massive runway for continued organic growth going forward
▪ Over the last few years, while the focus has been on acquisitions, the Company has been able to “water its
flowers” along the way – growing organically ~6.2% and ~6.8% for the periods 2016-2017 and 2017-2018
▪ We expect the Company to pursue the following “BUILD” opportunities going forward:
➢ Insourcing service – creating an in-house servicing team at the location level will bolster gross margins
and drive station level EBIT margins while dampening cyclicality (customers have to service their
existing infrastructure if they cut back on new product purchases)
➢ Layering on new products – similarly to POOL and Watsco, EnviroStar will expand into complimentary
businesses and create natural revenue synergies by being a “one stop shop” – the customer’s
purchase manager responsible for laundry equipment is likely to be responsible for all other equipment
purchasing as well (kitchen, detergents, boilers etc.)
➢ Expanding gross margins with existing relationships – EnviroStar has the opportunity for gross margin
expansion by sharing in the value creation with manufacturers as they grow and the Company can
ultimately lower their warranty, recall and defect costs by insourcing
➢ Combining locations in markets and onboard manufacturer relationships – while EnviroStar leverages
fixed cost at the station level, the Company can also leverage manufacturer relationships in other
markets to sell products and create revenue synergies in new marketsSource: SEC fillings
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
EnviroStar’s TAM: Washing Out The Short Stains
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▪ Similarly to other distribution companies like Watsco, POOL and SiteOne – we believe that as EnviroStar
continues to gobble up market share in its core laundry equipment distribution business – the Company will
expand into complimentary businesses to offer a full-suite of products and become a one-stop shop for
customers
▪ In order to assess EnviroStar’s runway for growth, we identified the total addressable market in the following
four categories:
Commercial Laundry Equipment Market –growing 5% per annum1
Industrial Detergents Market – growing 5% per annum1
Commercial Kitchen Equipment Market –growing 6% per annum1
Commercial Boiler Market – growing 6% per annum1
$6bn
$20bn
$25bn
U.S Total Addressable
Market = ~$55 Billion
TODAY
$4.5bn
Without modeling TAM growth going forward – if EnviroStar captures 10% market share by executing
on their playbook – investors could see a more than 30x increase in the stock price!
(1) Source: ADW Capital estimates / internal research
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
Auctions? None, the process is clean!
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▪ Unlike Watsco, EnviroStar does not compete for deals / does not typically participate in auctions
➢ In the course of our due diligence process, we discovered that “mom and pop shops” do not want to
sell to private equity because they are afraid “their people will get fired” or from the excessive
leverage put on their business – creating a natural tailwind for EnviroStar’s “buy-and-build” strategy
➢ We’ve often heard that the business owner doing $3-4 million in operating profit isn’t thinking, "I'm going
to build a $100-million platform out of this" and is likely more willing to partner with a strategic to be part
of “a bigger story”
▪ We believe that EnviroStar has the opportunity to acquire businesses at lower multiples than both
Watsco and POOL Corp. have historically and generate greater returns on invested capital – evidenced by
their deal making so far:
Average Multiple: 5.3x
Date
Announced Name Price Paid
Reported
Revenues
Pro-Forma EBIT
(Est.)
Multiple Paid
(Est.)
09/08/2016 Western State Design (WSD) $28m ($18m Cash / $10m Stock) $60m $6M ~4.5x
06/02/2017 Martin Ray Laundry Systems $4m ($2m Cash / $2m Stock) $11.5m $1.2m ~3.5x
09/11/2017 Tri-State Technical Services $16.5m ($8.25m Cash / $8.25 Stock) $27m $2.7m ~6x
12/11/2017 AAdvantage Laundry Systems $17m ($8.5m Cash / $8.5m Stock) $27m $2.7m ~6x
06/21/2018 Scott Equipment $16m ($8m Cash / $8m Stock) ~$25m $2.5m ~6.5x
08/06/2018 Industrial Laundry Services Undisclosed (Cash and Stock) Undisclosed Undisclosed Undisclosed
09/19/2018 "Laundry Distribution and Service" Undisclosed (Cash and Stock) Undisclosed Undisclosed Undisclosed
10/02/2018 Worldwide Laundry Undisclosed (Cash and Stock) Undisclosed Undisclosed Undisclosed
10/03/2018 Skyline Equipment Undisclosed (Cash and Stock) Undisclosed Undisclosed UndisclosedSource: SEC fillings and internal estimates
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
Reminiscent of XPO Logistics (NYSE:XPO)
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An investment in XPO at the time Bradley Jacobs became CEO in 2011 has yielded a ~10x return
▪ Similar to what Manny did in his early days at POOL Corp., as soon as Bradley Jacobs took control of XPO
Logistics in September 2011 – he began investing heavily in overhead to build up the infrastructure for
supporting the “growth engine” – causing EBITDA margins to decline dramatically
▪ We believe that over-time, as revenues ramp up in a similar fashion to XPO, EnviroStar will see EBIT margins
expand significantly as the Company leverages its platform and new corporate infrastructure
XPO Logistics12 months
Dec-31-2010A
12 months
Dec-31-2011A
12 months
Dec-31-2012A
12 months
Dec-31-2013A
12 months
Dec-31-2014A
12 months
Dec-31-2015A
12 months
Dec-31-2016A
12 months
Dec-31-2017A
LTM
12 months
Jun-30-2018A
USD USD USD USD USD USD USD USD USD
Total Revenue
158.0 177.1 278.6 702.3 2,356.6 7,623.2 14,619.4 15,380.8 16,636.0
Growth Over Prior Year 57.8% 12.1% 57.3% 152.1% 235.6% 223.5% 91.8% 5.2% 13.2%
Gross Profit
27.4 29.8 40.8 117.2 381.6 1,084.8 2,139.3 2,279.7 2,460.5
Margin % 17.3% 16.8% 14.6% 16.7% 16.2% 14.2% 14.6% 14.8% 14.8%
EBITDA
9.7 3.0 (25.3) (31.5) 57.4 336.3 1,131.5 1,281.6 1,397.2
Margin % 6.2% 1.7% (9.1%) (4.5%) 2.4% 4.4% 7.7% 8.3% 8.4%
Source: Capital IQ
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
Incentives
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▪ Henry Nahmad has purchased (not been granted) over 4 million shares through his two funds –
Symmetric Capital 1 and Symmetric Capital II – these are from friends and family and locked up – not an
anonymous pool of capital, especially when your mother-in-law is an LP! The annual meeting has parents,
cousins, and family friends
▪ The remainder of the management team owns roughly 25% of the Company as business owners have stayed
on-board after being acquired by EnviroStar
▪ Henry takes a modest salary, earning the rest of his compensation from very long-dated options –
unless the company is sold, the options only fully vest after a 27-year period!
▪ We expect the Company to begin a modest IR effort in the coming quarters as the business has become large
enough to invite Institutional Investor dollars and create a long-term owner oriented shareholder base
We own a meaningful stake in EnviroStar as reported and we are committed to remaining a long-term
owner of the business
CONFIDENTIAL 2018 ADW CAPITAL MANAGEMENT, LLC. ALL RIGHTS RESERVED.
Contact
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ADW Capital Management, LLC
1133 Broadway Suite 719
New York, NY 10010
Adam D. Wyden
212-920-9634